By Scott Wright

SHARES in FirstGroup leapt by 4.5 per cent after it found a buyer for its two of its three US bus operations, bringing a drawn-out exit process to a close.

The Aberdeen-based transport giant has struck a deal to sell its First Student and First Transit businesses across the Atlantic in a deal worth around $4.6 billion (£3.3 billion).

And it pledged that the sale would allow it to return around £365 million to shareholders throughout the calendar year, while holding out the prospect of further pay-outs to investors. These will depend on resolving the future of its Greyhound business, crystallising a First Transit earn-out, and as the UK market recovers.

It declared yesterday that it expects operating profit for the 2021 financial year to be ahead of previous management expectations.

The company is continuing efforts to find a buyer for Greyhound, its “non-core” US inter-city coach business, under a long-running strategy to slim down its portfolio. While talks over the sale of Greyhound are ongoing, a spokesman said the process has been affected by the pandemic.

The company is offloading the operations to EQT Infrastructure, a private equity group founded in Sweden in 1994, with the deal expected to be completed in the summer.

FirstGroup had been seeking a buyer for the two divisions since December 2019, when it revealed it had appointed advisers to explore a sale. A formal sale process began the following March. The move followed a sustained campaign for change by US activist investor Coast Capital, which had urged the board to sell First Student and First Transit to maximise value for shareholders. Just seven months previously, in May 2019, FirstGroup chief executive Matthew Gregory had unveiled a new strategy which envisaged a more streamlined portfolio, leading with First Student and First Transit. The strategy involved selling Greyhound.

The disposal of First Student and First Transit leaves the company free to focus on its UK-based First Bus and First Rail businesses, the latter of which runs four rail franchises. It also begins its withdrawal from the US market it first entered in 1999, with the acquisition of Bruce Transportation and Ryder. It then ramped up its presence across the Atlantic with the purchase of Laidlaw in 2007.

First Student is the largest provider of student transport in North America, running a fleet of 43,000 distinctive yellow buses. With a team of 48,000 people, it operates in 460 locations across the US and Canada. In December, First Group reported that the division recorded revenue of £404.4m for the six months to September 30, down from £851.6m, with the downturn reflecting school closures arising from the pandemic.

First Transit, which employs 20,000, is a major provider of outsourced transit management and contracting services in the market. It generated revenue of £484.5m for the six months to September 30, down from £588.7m. All staff at First Student and First Transit will transfer to the new owner.

Mr Gregory said yesterday: “We are pleased to have agreed the sale of First Student and First Transit in a transaction which recognises their full strategic value. Both are resilient, high quality businesses with strong prospects for returning to normal levels of service following the pandemic.

“As economies begin to emerge from the pandemic restrictions and society begins the process of building back better, the vital role of public transport is clear.

“The services we provide are critical to economic activity and social objectives including ‘levelling up’, and play an important role in combating climate change and helping local communities flourish. Going forward, FirstGroup will be a more focused, resilient business that is in a strong position to deliver for bus and rail passengers in the UK.”

EQT said it intends to invest in the electrification of the First Student and First Transit fleets while accelerating their transition to renewable fuel sources.

Crosby Cook, partner and investment advisor at EQT Partners, said: “First Student and First Transit play critical roles in North America’s transportation infrastructure; both businesses are market leaders, offering best-in-class safety, reliability, and service.

“EQT is excited to partner with the management teams of these businesses and invest in operational technology and fleet decarbonization to provide even safer and more environmentally friendly transportation services to students and communities across the continent.”

FirstGroup reported in December that it had narrowed losses in the first half of its financial year to £100.1m from £187.1m the previous time. It came after it warned in July of “material uncertainty” over its ability to continue as a going concern.

Shares closed up 3.8p, or 4.5%, at 88.9p.